Thursday, March 23, 2006

Do the French look happy?


Recently, Clive Hamilton again argued that we'd all be better off if we consumed less. The reason we all want the latest plasma tv or fast car, according to Clive, is not because big TVs are better or driving a nice car feels good, it's simply because I want to make others feel jealous of me. If I pull into my driveway in my new Nissan 350Z, only to find my neighbour bought a just as good Alfa Romeo, then, despite the effort, allegedly neither of us are better off. In sum, there is a coordination problem: we should all just argee to be more lazy.

However, since it's unlikely that a whole country of people will cooperate, people like Clive generally advocate the government stepping in and doing it for us. Fortunately, most countries have not been crazy enough to implement Clive's ideas but there's one exception: the French.

In the late 1990s, the French Government decreed that, with few exceptions, everyone would be restricted to only working 35 hours a week. Ostensibly, it was introduced to increase employment (following a lengthy tradition of successful French labour policies), yet it also provides an interesting test of Clive’s theories. As a result of the laws, everyone in France simultaneously increased their leisure, so presumably they should all be better off.

Well, the results from the French guinea pigs are in and they are not good for Clive and his band of fellow ascetics. A recent paper from Marcello Estevao (from the IMF) and Filipa Sa (from MIT) show that French workers are now less satisfied with their working arrangements. As the author's state:
Overall, our evaluation of the effects of the 35-hours workweek law is negative ... The 35-hours mandate did not work as a coordination mechanism in the presence of strong complementarities in leisure. Instead, it apparently introduced a distortion in workers’ choices and made them less happy.
Indeed, many French actively tried to circumvent the laws. There was an increased probablity of a worker taking a second job (a proxy for wanting to work more hours) and of moving from a large firm to a small firm (small firms had longer to implement the changes).

So, not surprisingly, people seem to be happier if left to decide how to make themselves happy. As an aside, the policy also did not significantly increase employment and the immdeiate prospects for real labour reform in France seem to be interminably blocked by another great French tradition: riots.

5 comments:

Luke van Hooft said...

Bloody lazy, non-working cheese eating surrender monkeys!!!!!

If only they fought the Germans as hard as they fight against capitalism!

pip said...

I don’t think the results of the study discredit Clive’s theory. The fact that people are trying to circumvent the policy and increase their work time and hence earnings, suggests that one of their motivations could be to increase their assets (except for of course those of us that choose to work for love of the job). While this may not be entirely (if at all) motivated by the desire to have a better tv etc than your neighbour, it doesn’t mean that it isn’t. Sorry Matt but it seems Clive’s theory is still plausible.

Matt Canavan said...

I agree that it is not a full refutation. Even so, if it was welfare enhancing you would expect more people to say they are satisfied with their curernt hours.

Also, your point raises another problem with Clive's theory. Even if we could make people better off by getting everyone to work less, the outcome would not be stable. Effectively, we'd have a cartel situation were everyone would have an incentive to cheat so I don't know how this could ever be a steady state.

Patrick said...

That actually sounds suspicious to me, because in France you can't, normally, take a second job.

So unless they refer to blackmarkets, or something similar, I'd be interested indeed if large numbers of people were really accepting the tax penalties of a second job in France.

Tom N. said...

In response to pip, Matthew said: "...your point raises another problem with Clive's theory. Even if we could make people better off by getting everyone to work less, the outcome would not be stable. Effectively, we'd have a cartel situation were everyone would have an incentive to cheat so I don't know how this could ever be a steady state."

No doubt this is true, but it is the same with any government tax or restriction: individuals have an incentive to circumvent it. So what? So not much, by itself.

It should also be pointed out that non-compliance with a regulation does not mean that the breacher does not support the regulation or is not better-off as a result of the regulation. I do not comply with speed limits, but I do support them as they affect others' speeds (including the predictability of others' speeds) which in turn affects me. I am also happy to pay the occasional fine for speeding.

Likewise, it may be in each Frenchman's interests to circumvent the work laws, but this does not mean that they are worse off as a result of the general application of those laws.*

Tom N.

* This is not to say that I necessarily support such laws as a means of addressing positional externalities.